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What Does Microsoft's Newest Research Mean for GoPro?

GoPro's Hero 3+ Source: GoPro

Today, action enthusiasts and GoPro (NASDAQ: GPRO  ) investors were treated to a nice surprise courtesy of Microsoft's (NASDAQ: MSFT  ) research labs. The company presented a rather novel solution to a problem that plagues GoPro users the world over: How to speed up time-lapse videos but eliminate camera shake. With GoPro singling out Microsoft's Xbox as a way to beef up its content distribution strategy, do signs point toward a much stronger relationship going forward?

The science
For the casual YouTube watcher, it might seem like as soon as somebody puts a GoPro camera on something awesome happens. In reality, it doesn't. In many cases, there are hours upon hours of viewing that becomes rather monotonous when viewed at normal speed.

Of course, a simple way to offset the monotony is to use a time-lapse function to speed things up. However, time-lapse can accentuate the shakiness of the movie, making it sub-optimal for first-person videos. Microsoft Research virtually solves the shakiness problem via its proprietary algorithm, resulting in an action-oriented, non-monotonous video that you can watch without all the jarring camera shaking.

This relationship is getting interesting
It appears these two companies are forming a partnership of sorts. That makes sense--after all, GoPro is a highly skilled device maker that is looking to monetize its content and needs reliable and deep-pocketed partners with which it can form distribution agreements. Microsoft has always had problems on the device front, from the Zune to the Windows Phone to the Surface tablet that was credited with costing former CEO Steve Ballmer his job. Looking at competitors Apple and Samsung, it becomes painfully obvious that Microsoft missed the mobile revolution; for all intents and purposes its only hit device is the Xbox.

And that's what GoPro is targeting for content delivery. GoPro specifically mentioned Microsoft's Xbox in its S-1:

For example, in the first quarter of 2014, we entered into an agreement with Microsoft to develop and launch the GoPro Channel on Xbox Live, a leading delivery system for IP video streams on connected televisions, that will provide us with access to advertising revenue, fees from third-party sponsorship of the GoPro Channel and the ability to sell our capture devices directly to consumers as they watch GoPro programming.

The Xbox could use some help
It isn't as if GoPro is the only beneficiary from this partnership. Microsoft's Xbox One console is faring rather poorly versus Sony's PlayStation 4. VGChartz reported that the PS4 has sold over 9 million units from its debut late last year, compared to only 5 million Xbox One sales as of the company's most recent update. Even worse, the Wii U is now beating the Xbox One in weekly sales thanks to renewed interest from the new Mario Kart 8 game.

Initially, the Xbox's struggles could be explained by price. The initial Xbox One unit came with the Kinect peripheral and cost $499 -- $100 more than the PlayStation 4. However, this year Microsoft released a version of the unit for $399 without the Kinect device and is still being outsold by Sony.

The Xbox One is in desperate need of differentiation. If the company can add value by pairing with this new brand, perhaps it can invigorate sluggish sales of its Xbox unit as well.

Final thoughts
On the surface, this sounds merely like another cool win for GoPro enthusiasts. However, when combined with the prior announcement of the GoPro channel on Xbox Live you start to see the broad outline of what could eventually be a strong partnership. That's great for GoPro investors who need the company to monetize content to keep its lofty valuations from cratering and taking the stock price with it.

And although Microsoft's Xbox is a relatively small part of its operations, you can bet the company is looking for ways to set it apart from the competition. In short, the GoPro partnership could be a win-win for both the hungry upstart and the software giant.

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Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 11, 2014, at 11:14 PM, c1c2c3c4c wrote:

    Kind of an interesting article, you don't seem to be familiar with any of the topics mentioned. My criticism is to look up Xbox and ps reviews under the different marketing strategies, you will find pure gaming focus is what people want, apparently even if it offers services at the same price, any deviation seems to confuse the market, illogical but true. There strategy recently became a simple games only everything else postponed. Sales have increased since seems consoles need to be matured before adults buy them for entertainment and the kids screaming at there parents to buy them are easily confused by a multi media non game exclusive device and will pick a game only unit over it.

    Also your Steve Ballmer comment is completely fictitious, he's a sales man and knew the only way to keep the company at the top long term was to become a better apple. He thus expanded the hardware division and started restructuring to allow an new ceo room to work quickly, the last step was to find a visionary which they didn't do but they have a good guy in the lead and gates is back in a larger role to help keep it running. Current long term plans are to focus on mobile to push it's cloud services and vise versa. Still doomed to fail without innovation but they are the most likley to pull it off if they can quickly change directions. I don't believe the layoffs were the way to achieve that goal but it is what he thought so whatever.

    They are more flexible but are no better for it. They just postpone things now and have no backups running parallel. Such as McLaren all we will get is the selfie centered phone.;)

  • Report this Comment On August 12, 2014, at 12:52 AM, TMFJCar wrote:


    Thanks for reading. However, I guess we'll agree to disagree on my content. For the most part we seem to disagree on our conclusions and there appears to be no issue with my facts. Personally, I'll admit that games are more important than the GoPro Channel. However, the more differentiators you have the better.

    As far as Ballmer goes, I'm pretty sure that's a factual statement. Many sources credit the Surface failure as the final straw with Microsoft's Board. Here's one for example:

    Personally, I disagree with many of your opinions about Ballmer: The idea to become a better Apple (since he laughed at the iPhone and was late to make a tablet).

    I also disagree with your comment that he expanded the hardware division considering both the Windows Phone and the Surface tablet were "me too" devices. They were reluctant followers, not leaders.

    Finally, the idea he was looking to find a visionary leader doesn't seem right to me considering he was forced out.

    Obviously we're both entitled to our opinions. Here at The Motley Fool we strongly believe diversity of opinion makes us all better investors. However, I don't think there is anything factually inaccurate here and we just disagree on our analysis of the data. Thanks for reading!

    TMFJCar -- the author

  • Report this Comment On August 12, 2014, at 10:08 AM, MFINK wrote:

    GoPro teaming up with Microsoft’s Xbox would be huge! The potential is so great that I’m ready to buy just from the prospects for this.

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Jamal Carnette

After working at The Motley Fool, Jamal Carnette decided to try his hand at writing for a change. You can find him writing about technology, consumer goods, sports, and pontificating on any competitive advantage. His previous jobs include Mortgage Trainer, Financial Advisor, and Stockbroker. Jamal graduated from George Mason University with a bachelors of science in finance and is a CFA Level III candidate. Follow me for tech trends, info on consumer brands, and sports banter.

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